I totally understand that LOQ is a terrific growth company, but that valuation is looking really stretched now - almost 3 times sales, for a company with a fairly standard, sub-10% profit margin. 25 times 2012/13 forecast earnings is pretty eye-watering, but the market clearly believes strong growth will continue.
Badly-worded RNS of the day award goes to Ubisense (UBI) with their schizophrenic trading update, which starts off sounding like a profits warning, gradually warms up, and then ends up sounding positive. It's just all wrong.
Take this sentence for example;
"The Group has displayed good momentum in the second half of the period but timing of some projects has led to revenue growth below market expectations and profitability in line with consensus expectations for the full year."
They also raised £6m post period end, in a Placing at around the current share price. I don't know anything about the company, so can't value it, because smaller growth companies are all about assessing the growth potential, and then forming a valuation around that. Whereas my value investing approach is more about looking at ongoing cashflows, divis, and assets.
Things seem to be going well at Netcall (NET). We met the CEO at a Mello event some time ago, and it sounded a decent company. He sticks in my mind because he had one of the most bizarre accents I've ever heard, which I hope it's not offensive to mention - think half Geordie, half Swedish, and you're in the right ballpark!
Their trading update today for the 6m to 31 Dec 2012 reads well: trading "comfortably in line" with expectations, strong order inflows, double digit sales growth. Net cash of £8.2m also!
The valuation looks pretty reasonable, despite the shares having had a good run already. A PER of 13, for a company where a fifth of the mkt cap is net cash, is not expensive, given that they are performing well too.
Finally, I note that Stuart Rose has appeared as the new Chairman of Ocado (OCDO). What on earth is he thinking of?! Mind you, a key feature of Rose's career in the 15 years or so I've been aware of him, is that he has an uncanny skill in timing his entry into companies when the heavy lifting of a turnaround has already been done, but hasn't yet come through in the figures. So he gets the glory for the turnaround, without actually having to do much work. That's exactly what happened at Arcadia, Bookers, and M&S. So perhaps his exquisite timing is a signal that Ocado may not be the basket-case that many of us think it is?
OK, that's it for now. Have a good day, and see you same time tomorrow morning.
(Paul does not hold any positions in the companies mentioned today)